MAPPING OMNI-CHANNEL WFMOptimal management of 28 million associates who work in retail extends far beyond cost cutting

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Optimal management of 28 million Americans who work in retail

extends far beyond cost cutting.

No industry is as dependent as retail on the performance of its

employees for every element of success, ranging from store sales to

profits to customer satisfaction. Also, no industry has a bigger

mountain to climb than retail in effectively managing a workforce

the size of a national army in a way that delivers optimal value to the

brand and meets corporate goals.

The reason the mountain is so high is because the number of

employees involved is so vast. According to the recent “Retail

Means Jobs” campaign by the National Retail Federation(NRF),

retailers directly employ 28.1 million Americans, far more than any

other industry, and they pay 17% of the nation’s total wages,

salaries and benefits.

Scale of this magnitude multiplies complexity, and even though

there are powerful tools available to help retailers control labor

costs the truth is that effective management of labor extends far

beyond cost cutting.

Physical stores are a large part of the retail labor pool and they are

currently racing to keep pace with technology enabled, shop-

anywhere customers. Fortunately for retailers, digital technologies

(tablets and other mobile devices, for example) have allowed

stores to tap into such omni-channel capabilities as clienteling and

save-the-sale functionalities to cope with stock outs. However, the

processes required to optimize these capabilities and better

manage labor scheduling have yet to catch up.

Today, retailers have the ability to optimize labor scheduling in 15-

minute increments and get real-time budget variance updates. This

allows store managers to make mid-week adjustments based on

sales volume instead of waiting for a report at the end of the month.

But to effectively operate at this granular level while simultaneously

adopting new omni-channel responsibilities is a high bar to reach. It

requires a new approach to workforce management (WFM), one

that necessitates creating a detailed roadmap that includes business

case development, end-to-end process maps, consolidated KPI

dashboards, shifting from task management to sales conversion,

and rolling out enterprise and associate mobility tools.

This month’s custom research report polled retailers in early May

about key elements of their approach to workforce management,

including productivity, execution improvement, and top strategies

for 2012. Here’s what we found.

Workforce management is the single largest retail cost component

after COGS. It is in the range of 10 to 20% of sales. The ROI from

optimizing workforce management is attractive. The bigger appeal is

that ROI can be quick. However, retail’s history of developing labor

optimization models remains poor. Models used in the past for

standardizing labor scheduling, task management, and time and

attendance processes have rarely been validated against improved

sales or customer satisfaction.

For retailers, workforce management can be broken up into two

levels of technology implementation. First is the fundamental

package implementation (such as Kronos, Infor and RedPrairie),

mobile and kiosk enablement of workforce management and time

and attendance data integration with application forecasting

algorithms to improve store associate shift scheduling and

application upgrades/enhancements. The second is deployment of

best practices and analytics-based store labor productivity

improvement to reduce labor costs through accurate planning.

The important thing to remember here is that while staffing levels

directly impact store performance, improved workforce

management nudges employee morale upwards. In turn that

improves customer satisfaction. The domino effect is worth the

effort.

For retail to achieve this is not difficult. The journey begins with

understanding store attributes and goals, the required productivity,

the components of labor process re-engineering and optimization

followed by measurement of performance metrics and continuous

improvement.

By Srini Pallia, Senior Vice President, RCTG, Wipro Technologies

LEVERAGING WFM TO IMPROVE THE CLIENT EXPERIENCE AND INCREASE TRAFFIC CONVERSION

WFM technology is so pivotal to retailing that software vendors have

devoted significant resources to it over the years, making it one of the first

point solutions in retail to reach maturity. Today, a number of sophisticated

WFM solutions can be deployed by retailers that will perform as expected,

hit on-time and on-budget goals, and achieve measurable return on

investment (ROI).

As a result, a full third (33.3%) of respondents say their WFM solution

meets their needs today and for the foreseeable future. This is great news

for a sizable block of retailers, but the news is not great for the vast majority

who are currently experiencing some level of pain with their WFM

solution due to software constraints. (See Figure 1)

The “pained” group includes 45.5% who say their WFM meets their

needs today but will not within two years, which is another way of

saying plans for a WFM upgrade need to begin within 12 months if they

want to avoid hitting a productivity wall. This group also includes 21.2%

who say their WFM doesn't meet their needs today and is the source of

a high level of pain. This is another way of saying they should already be

engaged in the upgrade process with a goal of deployment by the end of

the year, because if they don't they risk causing significant financial and

store-level harm.

After benchmarking the level of pain experienced by retailers with their

WFM software, we wanted to find out how they are using analytics-based

capabilities to improve store productivity. This chart proved to be one of

the most interesting in the study. (See Figure 2)

Heading the list is decreasing labor costs by optimizing workload

distribution (48.5%). Historical analysis is a beautiful thing when used to

determine peaks and valleys of foot traffic per month, per week, per day,

and per half day. It forms the basis for the ROI justification needed in

business cases that CIOs develop to get budget approval for an upgrade

and provides a rationale for cost cutting.

However, beyond cost cutting retailers report they are focusing on two

analytics-based productivity strategies. The first is to leverage customer

satisfaction KPIs. This was selected by 45.5% and came in a close second to

cost cutting. Without customer satisfaction data retailers operate blindly.

Unintended consequences of longer lines at checkout, for example, need

to be discovered before lasting damage is done to loyalty, sales and the

brand image. And this can only happen if customer satisfaction is a key

metric tracked.

The next highly ranked priority on the analytics-based productivity

improvement list is optimizing payroll allocation to reduce labor budget

variance (39.4%). This is a corollary to cost cutting, the top item on the list.

Labor budgets and variances are set by headquarters and tracking them is a

necessary priority.

Clearly we can see that retailers are focusing on the importance of using

analytics-based methods to achieve cost cutting, but we can also see that

there is a growing recognition that labor strategy needs to be aligned with

customer satisfaction. Happy customers buy more products and return to

stores more often.

PAIN POINTS AND PRODUCTIVITY

High pain doesn't meet needs, requires updating

No pain, meets needs now and for foreseeable future

Low pain, meets needs but will not within two years

21.2%

33.3%

45.5%

FIGURE 1

Describe the pain level of your current workforce management solution and how it meets your company’s needs

FIGURE 2

For PRODUCTIVITY IMPROVEMENT, which of the following analytics-based store labor strategies are high priorities?

48.5%

45.5%

39.4%

36.4%

27.3%

24.2%

24.2%

12.1%

Decrease labor costs by optimizing workload distribution

Leverage customer satisfaction KPIs

Optimizing payroll allocation to reduce labor budget variance

Visibility into productivity KPIs to improve store performance

Develop comprehensive scorecard of KPIs aligned with goals

Decrease labor costs by optimizing task assignment distribution

Visibility into labor KPIs to improve faster decision making

Tie KPIs to specific store attributes

One of the biggest leaps forward in the last 10 years for WFM technology

has been the addition of task management or execution management

at the store level. This refers to a sophisticated ability to assign and

communicate specific tasks to employees through POS terminals,

back-office computers or mobile devices. This ability helps ensure

compliance for things like promotions, changing merchandising floor sets,

stocking shelves and other store operations.

Task management tools have been rolling out through retailing for several

years, but now retailers recognize that just micromanaging daily store tasks

will not take them where they want to go in improving performance.

Interestingly, nearly two thirds of respondents (64%) say they want to shift

their task management processes to focusing on sales and customers.

(Figure 3)

This is a major endorsement of a strategy that emphasizes

customer-centricity as a way to increase comp-store sales. It is also a

good way to combat showrooming, where customers use stores as

display rooms but purchase items from online retailers. This finding

indicates that retailers have a renewed sense of urgency to take in-

store customer service to a new level and deliver a better shopping

experience.

This insight is borne out by the second ranked item on the chart,

which is to deploy operational models that improve store efficiency.

This option was chosen by 45.2%, more than 20 points below the

top choice. Why the big drop between the first and second choices?

In today's highly competitive retail environment, which has some

experts provocatively raising the spectre of the death of stores,

strategies that focus on sales and customers trump efficiency.

As previously mentioned, WFM is a mature retail technology, but that

doesn't mean it isn't evolving as rapidly as other tools in the retail tech

stack. One way WFM is playing a bigger role in the retail enterprise is

through the addition of multiple data sources to help optimize scheduling.

This option was by far the top choice of retailers when we asked which

technologies they have in place or are currently deploying to help improve

store execution. (Figure 4)

The second place choice on this chart is 24 points down (advanced

workforce management software at 34.5%). Again, why the big

difference between the first and second choices? It is evidence of how

important sophisticated scheduling is to retailers, which was also found

in our analysis of Figure 2, where we learned that optimizing workload

distribution was the top ranked method to achieve productivity

improvement.

EXECUTION BEST PRACTICES AND TECHNOLOGIES

To improve store Execution Processes, which of the following Best Practices do you have in place today?

64.5%

45.2%

29%

19.4%

6.5%

Shift from task management to focusing on sales/customers

Operational models to improve store efficiency

Roadmap to achieve store labor optimization

“Value grid” to tie costs to business benefits/impact

End-to-end process maps from headquarters to stores

FIGURE 3

To improve store Execution Processes, which of the following technologies do you have in place or are currently deploying?

58.6%

34.5%

31%

27.6%

24.1%

17.2%

Scheduling with multiple data sources (POS, skills, tasks, etc.)

Advanced workforce management software

Time & attendance data integration w/forecasting algorithms

Task management software w/o mobile device support

Real-time labor and productivity alerts to managers

Task management software w/ mobile device support

FIGURE 4

So, we have confirmed evidence that store-level workload distribution

managed by analyt ics-driven labor schedul ing tools are

at the very top of the retailer priority list in 2012. This is a major finding

of this study.

But what about 2013 and beyond? To find out we asked retailers to tell us

which technologies they plan to deploy by the end of the year or start in

2013. There is some overlap in Figures 4 and 5, since both questions seek

to account for projects that are under way or will begin by the end of the

year. So, the best way to look at these numbers is from a trending

perspective. (Figure 5)

Looked at through this lens we see that scheduling with multiple data

sources, which we previously identified as a major finding in this study, is

not highly ranked for starting new deployments by the end of the year. The

reason is that a significant portion of retailers already have this technology

in place compared to other selections on the list, and therefore they have

less need to upgrade.

The top technology that retailers will start by the end of the year is time

and attendance data integration with forecasting algorithms. Time and

attendance was once the least sexy solution in the WFM tool box, but

today it can be used to improve lunch break timing, reduce

overtime charges, and increase payroll accuracy. When powered with

forecasting algorithms these tools not only account for associates being

physically on premise, but they also help analyze what is and what is not

productive work time.

One interesting point to note is the ranking of mobile-enabled

technologies on the planned investment priority list. For tech currently in

place or currently deploying they are the last two items on the list.

However, for future deployments starting in 2012 theyranksecond (30.8%

for task management software with mobile device support) and fourth

(23.1% for mobile device apps to request associates in store).

FIGURE 5

To improve store Execution Processes, which of the following technologies do you plan to deploy that you do not have now?

26.9%

30.8%

19.2%

19.2%

34.6%

23.1%

11.5%

30.8%

19.2%

19.2%

15.4%

11.5%

11.5%

3.8%

Time & attendance data integration w/ forecasting algorithms

Task management software w/ mobile device support

Advanced workforce management

Scheduling with multiple data sources (POS, skills, tasks, etc.)

Real-time labor and productivity alerts to managers

Mobile device apps to request associates in-store

Task management software w/o mobile device support

Time and attendance was once the least

sexy solution in the WFM tool box, but

today it can be used to reduce overtime

charges and increase payroll accuracy.

ACHIEVING STORE GOALS

As we have seen in several parts of the study, a focus on reducing labor

costs is always a corporate imperative, and it tops the list (chosen by

45.2%) when we asked respondents to name the factors that are having a

big impact on achieving store goals and improving customer satisfaction.

(Figure 6)

In second place on this list is the complaint that staffing levels are not

adequate (38.7%). This has been a common refrain by store

managers in recent years as retailers have cut staffing to the bone.

As sales have slowly but steadily picked up over the last 12 months,

hiring has lagged and placed a strain on sales and customer service.

Tied for third on the list is a factor related to reducing the labor cost

imperative – weak or low employee morale (35.5%). This is a

perennial challenge in retailing, but its importance should not be

ignored. Dispirited associates communicate their displeasure to

customers with damaging results. Frequently, the cause of low

morale is inadequate staffing during peak periods, which causes

stress and discord. Many of the tools and methods discussed in this

report can solve this problem.

Drilling down into specifics about store managers' workbenches we find

the following metrics are most commonly used: KPIs for labor expense

(66.7%), financial goals (63.3%), store performance (60%) and sales per

employee (53.3%) (Figure 7)

Although customer satisfaction has shown up in several places in this

report as being a top priority, it is interesting to see that it does not rise to

the level of being a KPI on the manager's workbench for most retailers.

Today, just 36.7% include it.

FIGURE 7

Which metrics for store-level manager workbenches do you currently follow?

66.7%

63.3%

60%

53.3%

36.7%

36.7%

33.3%

10%

KPI for labor expense

KPI for financial goals

KPI for store performance

KPI for sales per employee

Employee incentives

KPI for customer satisfaction

KPI for labor scheduling

KPI for turnover

FIGURE 6

Which of the following factors are having a big impact on achieving store goals and improving customer satisfaction?

45.2%

38.7%

35.5%

35.5%

25.8%

22.6%

Reducing labor costs has become imperative

Staffing levels are not adequate

Infrequent adjustments to historical data models

Weak or low employee morale

Skills are not aligned with responsibilities

Labor budget is not aligned with store labor demand

ACHIEVING ORGANIZATIONAL GOALS

To determine just how retailers are executing their labor optimization

strategies we asked retailers to tell us the steps they have taken to achieve

them, and interestingly no clear strategy emerged. Three steps tied at

46.7%— allocate labor budget to store need and operational constraints,

forecast work load for stores based on identified drivers, and align

scheduling for customer-centric drivers and back-room activities. The next

step on the list is just a few points lower, at 43.3%: define labor productivity

improvement goals for each store. (Figure 8)

However, when we filter responses by leaders (identified as those with

revenue that has increased by more than 3% over the last 12 months)

and laggards (those with revenue that has decreased) a different

picture emerges. A big majority of retail leaders (61.5%) have aligned

scheduling for customer-centric drivers and back-room activities,

whereas only 20% of laggards have taken this step.

This is one of the most interesting findings in the study. While WFM tools

have matured and continue to evolve they will not produce optimal results

until customer–centric drivers have risen to the same level of importance

as other corporate imperatives. The fact that revenue leaders who have

taken this step outnumbered laggards three to one is strong evidence that

the strategy can produce measurable results.

Since WFM solutions play different roles in stores, DCs, headquarters and

call centers, we wanted to find out where recent investments have gone

and where future ones are going. (Figure 9)

Tied for first place for recent investment are DC/warehouses and

headquarters (44%), which currently have up-to-date WFM technology in

place. However, the clear winner for future investment is the store, where

30% are updating now and another 23.3% will update in 2013.

Like other mature retail technologies, such as POS, investment plans for

WFM run in cycles. The previous cycle focused on DCs and headquarters,

and as a result investment in these areas is slowing down for now, which

signals that challenges have been resolved for the moment and it is time to

focus on stores

FIGURE 8

Which steps has your organization taken to better achieve labor optimization?

46.7%

46.7%

46.7%

43.3%

36.7%

23.3%

13.3%

Allocate labor budget to store need and operational constraints

Forecast work load for stores based on identified drivers

Align scheduling for customer-centric drivers and back room activities

Define labor productivity improvement goals for each store

Fund best-performing stores to support sales and margins

Consolidated labor KPIs dashboard

Voluntary program for full-timers to provide scheduling options

FIGURE 9

What is the status of your workforce solutions in each of these corporate divisions?

DC/Warehouses

Headquarters

Stores

Call centers

44%

44%20%

23.3% 30% 26.7%

25%12.5%20.8%

20%

4%

12%

FIGURE 10

How many employees are there in your organization?

Less than 5,000

5,000-10,000

10,000-25,000

25,000-50,000

More than 50,0003.1%

3.1%

6.3%

15.6%

71.9%

FIGURE 11

What is your organizations’s annual revenue?

Less than $2 billion

More than $100 million

$1 billion to $2 billion

$500 million to $1 billion

$100 million to $ 500 million15.4%

23.1%

15.4%

23.1%

23.1%

FIGURE 12

How did your company’s sales revenue perform in the last 12 months?

Decreased

Increased between 0% - 3%

Increased more than 3%

19.4%

19.4%

41.9%

METHODOLOGY

CONCLUSION

This study was conducted during the month of May and only senior

executives from national or large regional retailers were invited to

The flashpoint between serving customer needs and dealing with pressure

to do more with less is always a source of conflict that plays out in

workforce management. Fortunately, advanced WFM solutions have

matured to the point where they can effectively balance these competing

missions, especially if they are integrated with new data sources and

incorporate customer satisfaction concerns.

participate. The results do not include any store-level, field level or regional

employees. Only headquarters level staff responses were included.

Most retail organizations have long used analytics to optimize inventory,

pricing and forecasting on a store-by-store level, but many have been

slow to extend analytics in an effective way into their WFM solutions. This

is beginning to change as retailers begin to alter their view of WFM, from a

point solution to an enterprise solution that requires end-to-end, omni-

channel capabilities. RIS By Joe Skorupa

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